Correlation Between Schwab Fundamental and Dimensional International

Can any of the company-specific risk be diversified away by investing in both Schwab Fundamental and Dimensional International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Schwab Fundamental and Dimensional International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schwab Fundamental International and Dimensional International Value, you can compare the effects of market volatilities on Schwab Fundamental and Dimensional International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Schwab Fundamental with a short position of Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Fundamental and Dimensional International.

Diversification Opportunities for Schwab Fundamental and Dimensional International

0.97

Correlation Coefficient

Schwab Fundamental  Dimensional International

Almost no diversification

The 3 months correlation between Schwab and Dimensional is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Fundamental Internation and Dimensional International Valu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and Schwab Fundamental is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Schwab Fundamental International are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Schwab Fundamental i.e., Schwab Fundamental and Dimensional International go up and down completely randomly.

Pair Corralation between Schwab Fundamental and Dimensional International

Given the investment horizon of 90 days Schwab Fundamental International is expected to under-perform the Dimensional International. In addition to that, Schwab Fundamental is 1.05 times more volatile than Dimensional International Value. It trades about -0.05 of its total potential returns per unit of risk. Dimensional International Value is currently generating about -0.02 per unit of volatility. If you would invest  3,716  in Dimensional International Value on September 2, 2024 and sell it today you would lose (43.00) from holding Dimensional International Value or give up 1.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Schwab Fundamental Internation  vs.  Dimensional International Valu

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Schwab Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Dimensional International is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Schwab Fundamental and Dimensional International

The main advantage of trading using opposite Schwab Fundamental and Dimensional International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schwab Fundamental position performs unexpectedly, Dimensional International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional International will offset losses from the drop in Dimensional International's long position.

The idea behind Schwab Fundamental International and Dimensional International Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.